The UAE has the potential to invest up to $76 billion in projects to develop its hydrocarbon sector over the next five years to become the second largest Arab energy investor after Saudi Arabia, overtaking Iran, a news report has said.
Official estimates showed energy capital investments in the Middle East and North Africa (MENA) region could total around $525 billion during 2012-2016, but such projects face funding problems, rising costs and other challenges, the Emirates 24/7 report said, quoting an industry study.
“In the context of a global economic downturn and regional political turmoil, our review of MENA energy investment for the five-year period 2012-16 points to a broken momentum, yet mixed outlook,” Dammam-based Arab Petroleum Investment Corporation (Apicorp), an affiliate of the 10-nation Organisation of Arab Petroleum Exporting Countries (Oapec), was quoted as saying.
“On the one hand, driven by the oil downstream and the power sector, the anticipated investment of $525 billion is higher than the actual capital requirements found in the last review,” Apicorp said.
“On the other hand, such a level remains well below the potential investment identified on that occasion. Whatever the interpretation of these findings is, one thing is clear.
Project sponsors will continue to face many of the same challenges, i.e. cost uncertainty, feedstock availability and fund accessibility, with the latter becoming more critical than any time before,” the Apicorp study said.
The study said internal financing would not pose major problems as long as the value of the OPEC basket of crudes stays above $90/barrel.
“In contrast, external financing, which comes predominantly in the form of loans, is likely to be daunting in the face of a combination of collapsing loan supply and persistently high cost,” it said.
A breakdown showed just over two-thirds of the energy capital investment potential continues to be located in the same five countries reviewed previously, namely Saudi Arabia, UAE, Iran, Qatar and Algeria, none of which has faced the sort of upheaval witnessed in some of the countries worst-hit by the global crisis of 2008 and the ongoing slowdown.
Saudi Arabia, the world’s dominant oil exporter, tops the ranking of energy capital investment potential with $141 billion. In this country, investment has mostly been generated by Saudi Aramco and Sabic, as domestic private investors have continued to struggle to attract capital.
“Taking over from Iran, the UAE has become a distant second, with nearly $76-billion worth of energy investment (potential),” said the Apicorp study.
It said tighter international sanctions and the retreat of foreign companies have ended up taking a toll on Iran’s energy investment potential, which now stands at a mere $58 billion.
Similarly, but for completely different reasons, investment in Qatar has also been on a sharp downtrend. “With the moratorium on further development of the North Field still in place, energy capital requirements have plummeted to $41 billion,” it said.
A similar downtrend is seen for Algerian, where the investment recovery seems to be slower than other Arab countries.